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Blog post banner of What Is Timesheet Fraud and How To Prevent It

What Is Timesheet Fraud and How To Prevent It?

As a company, if you are still relying on paper timesheets on spreadsheets to manage employees’ time and attendance, you are opening yourself to timesheet fraud. When a business manages employees’ time manually, it is prone to inefficiencies, inaccuracies, and non-compliance with working time provisions. It is not uncommon for such businesses to have timesheet fraud problems. Companies lose not only vast sums but also productivity due to such activities. An apt example of how severe timesheet fraud consequences can be is Saba software. The company was charged with timesheet fraud crimes, and SEC directed it to pay $1.7million in fines.

In this article, we will detail everything about timesheet fraud that you must be aware of. We will discuss ways to increase management controls and how to eradicate deliberate forgery.

What is timesheet fraud?

Timesheet fraud is when employees at organizations that allow them to enter information regarding attendance into timesheets intentionally manipulate the data. Most of these businesses have a culture of employees recording the clock in and clock out time manually. The HR managers confirm these records for their validity later on. However, this opens an opportunity for some employees to manipulate the information in the timesheets by exaggerating the data.

Merely rounding up the attendance time to the next hour is a case of fraud. Such timesheet fraud cases might not look too alarming, but when these extra minutes are compounded, they buildup into hours or even days. It is the responsibility of HR managers to ensure that all workers put in accurate attendance information in timesheets. Inaccuracies in attendance data can cost your business much money without you even realizing its impact.

It will help if you familiarise yourself with what timesheet fraud is to ensure that no such activity occurs in your organization.

Is falsifying a timesheet a crime?

Yes, there are legal provisions against timesheet fraud, which can lead to job loss or legal proceedings against the offenders. Companies can terminate the employment contract or file civil liability and criminal charges against employee padding hours.

Companies must communicate the timesheet fraud consequences to the employees and mention them in their employee contracts. In some cases, employees getting paid for the hours they have not worked can be trialled as guilty of theft. In some countries, time theft by the employees is taken as defrauding.

Companies have the right to press charges against workers who commit timesheet fraud or indulge in time theft activities. However, this approach can be expensive. A much more suitable option is to terminate the employment contract.

What is the most common type of timesheet fraud?

For HR managers, it is crucial to understand what constitutes a timesheet fraud. Sometimes employees can commit such frauds out of carelessness accidentally. When you know the different types of timesheet frauds, you can take the appropriate action. Here are some most common types of time fraud:

1. Exaggerating work hours

The most common type of time fraud in companies that use hard copy timesheets is inflation of work hours. Employees can intentionally record incorrect arrival and leaving times.

2. Human error causing inaccuracies

HR managers can commit mistakes when the data from manual timesheets are migrated to the payroll software. Here the intention is not to save time theft, but due to inaccurate attendance records, problems arise. Such inaccuracies increase with the number of times the data has to be copied or added manually. An easy solution to get rid of it is to use an automatic attendance system like Truein that easily integrates with the payroll software.

3. Buddy Punching

When companies rely on outdated card punching attendance systems, they are prone to the practice of buddy punching. Here an employee puts in false arrival and leaving time on behalf of a colleague. Buddy punching is one of the most common types of timesheet fraud.

4. Long breaks

Some employees can exploit the lunch breaks by taking longer time breaks than the allotted one. This practice can significantly affect the productivity within a team and the work culture of other employees who might be affected by such behaviour. Even unauthorized breaks during work hours are time theft. Many employees are often seen doing their personal work and lengthening their lunch/tea breaks.

5. Favouritism

Unlike other types of time fraud, this is committed by managers and supervisors who tend to favour an employee over others. Favouritism is when managers or supervisors overlook absenteeism, lateness, or long breaks off an employee they like or share personal interests with.

How to prevent timesheet fraud?

There are several ways to curb the menace of timesheet fraud. The right solution depends on what type of fraud the organization faces.

Check and approve the timesheet regularly

If your company cannot get rid of manual submission of timesheets, you can instil strict policies around timesheet management. Ask managers and supervisors to check and approve the timesheet regularly. Clearly define strict actions against the employees who will indulge in time theft activities.

Such steps will encourage workers to record the accurate time promptly. Also, ensure that workers submit their timesheets without delay because the more time they take, the more prone they will be to commit mistakes.

You are responsible for ensuring that shift schedules and workloads are optimized, so workers do not feel unnecessary pressure. If the timelines are unrealistic and shift schedules are too overbearing, workers might be forced to commit buddy punching. Review the shift schedule with employees to make it easy for them.

Install CCTV cameras to monitor employee activity

It is advisable to install CCTV cameras to monitor employee activity on the floor. This will help in managing problems like long breaks and buddy punching.

Switch to automated attendance systems

Adopting automated attendance systems can eliminate inaccuracies in attendance recording and curb activities such as buddy punching. While biometric attendance systems are standard, their performance and accuracy are not as efficient as modern AI-powered face recognition attendance systems like Truein.

Truein is a highly effective solution to prevent timesheet fraud as it uses facial recognition technology to mark attendance. There is no scope for exploiting the attendance system by clocking in inappropriately.

Moreover, it eliminates the need to manually manage timesheets as it integrates with some of the most popular payroll systems. The employee attendance data is directly imported into the payroll software. It saves a lot of time for HR managers and reduces overhead expenses by promptly providing accurate labour data for the payroll calculation. It has robust scheduling, reporting, and leave management features that help companies manage business operations effectively, thus increasing their productivity.

Conclusion

Timesheet fraud can be a significant productivity issue and affect revenue if left unchecked. It is the responsibility of HR managers to prevent time fraud cases. If your company doesn’t have strict attendance policies or if there is a communication gap between managers and workers, it is essential to bridge the gap and clearly state the consequences of indulging in timesheet fraud activities. Thus, companies must take all the precautions necessary to prevent timesheet fraud before taking legal action against employees. We hope this guide will help.

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